Will the Minister clarify the interaction between the returns that insurance special purpose vehicles are required to supply under the Financial Services and Markets Act 2000 and the tax burden? The explanatory notes almost suggest that the taxation is driven by forms. I am sure that that is not meant to be the case, but I should be grateful if the Minister commented on it.
I am pleased to see that the Government have tabled amendment No. 33. The issue caused significant concern among all parties in Committee. By attempting to amend the Bill, the Government appeared to move to deal with a tax case that was in progress, so it is good that the Treasury has recognised the importance of the case continuing and working its way through. I know that that was welcomed by those concerned with the case.
I thank the hon. Gentleman for those remarks. I am obviously sorry that we were not able to introduce the amendments in Committee, but we were able to engage fully with the company concerned only after Committee. That has led to the clarifying amendments before us, with which I understand the company is completely happy, so I hope that we are all square on that.
Amendment No. 32 would introduce the power to allow tax rules to be made by Treasury order for a small and specialised class of insurers in respect of insurance special purpose vehicles. I did not pick up the precise point that the hon. Gentleman made, so if he would like to intervene now, I shall try again.
I was just concerned about the flavour of the explanatory notes regarding the interaction between the regulatory returns that life assurance companies make and the basis of taxation. The issue, which I think came up in the proceedings of the previous Finance Bill, or it may even have been during the Finance Bill before that, is the way in which reserves are classified in the Financial Services Authority's forms and so on. The explanatory notes were not entirely clear about how the FSA's returns interacted with the taxation of life assurance companies, and I just wanted confirmation that tax is not being driven by the FSA's regulatory returns.
I can clarify that. That particular class of special purpose vehicles does not have to make returns to the FSA, which is why we need the set of rules that we will introduce through secondary legislation very soon.
Amendment agreed to.
Amendments made: No. 31, page 271, line 14, after 'period', insert
'and distributions received by the company in the accounting period from companies resident in the United Kingdom so far as referable (in accordance with section 432A of the Taxes Act 1988) to the company's basic life assurance and general annuity business'.
No. 32, page 272, line 8, at end insert—
'Insurance special purpose vehicles
19A In section 431A of ICTA (powers to amend), after subsection (2) insert—
"(2A) The Treasury may by order make provision as to the application of the Corporation Tax Acts in relation to insurance special purpose vehicles.
(2B) An order under subsection (2A) above may in particular contain provision—
(a) making amendments of any provision of the Corporation Tax Acts, or
(b) making provision for the life assurance provisions of the Corporation Tax Acts to have effect in relation to any specified description of insurance special purpose vehicles subject to specified modifications or exceptions.
(2C) An order under subsection (2A) above—
(a) may make provision having effect in relation to accounting periods current when it is made, and
(b) if it is made in consequence of, or otherwise in connection with, provision made by any enactment or instrument, may make provision having effect in relation to the same times as that enactment or instrument."'.
No. 33, page 275, line 31, at end insert—
'(3) But that amendment does not have effect (and is to be treated as never having had effect) in relation to a company if a relevant determination is made in proceedings commenced by the company before
(4) A relevant determination is a determination that losses incurred in an accounting period earlier than that in which
(a) beginning on or after
(b) ending on or before
Order for Third Reading read.
I beg to move, That the Bill be now read the Third time.
Will you pass on my thanks, Madam Deputy Speaker, to the Chairman of Ways and Means and to all the Chairmen who helped us in Committee? I should like to thank all Members who participated in Committee of the whole House, in Committee, and on Report over the past two days. They have closely scrutinised the major changes to our tax system that the Bill introduces. I also pay tribute to the Opposition parties' spokesmen and women, who have been extremely well briefed and meticulous in their pursuit of the detail. Although my hon. Friend Rob Marris is not in his place, may I say that he was missed by Finance Bill regulars? However, we were grateful for his contributions on the Floor of the House.
The Bill supports our economy. Like the rest of the world, we are facing a tough time. The ongoing disruption to global financial markets and rising world food and fuel prices are international trends, but are having an impact in all areas of Britain. The rising price of oil is raising the cost of filling up the car and of gas and electricity bills, which have risen by more than 15 per cent. and more than 12 per cent. respectively in the past 12 months. The price of some staple foods has gone up even more steeply.
However, our economy is well placed to respond to those challenges. Although inflation is rising, it is lower than in the USA or the eurozone and remains far lower than it was in the past; the same applies to interest rates. The UK has also benefited from more than 15 years of continuous growth and from 10 years in which income per head has risen faster than in any other country in the G7, taking us from the bottom of the table to second from the top. Crucially, there are now 3 million more people in work than there were in 1997. Employment is at a record high.
We need to support families and businesses at this time, so the Bill delays the introduction of the fuel duty rise that was due to have taken place in April, as was discussed earlier this evening. The Bill also raises personal allowances for this year. We continue to look at the best way to continue to support those on low incomes in the future. My right hon. Friend the Chancellor has said that he will introduce proposals to do that at the pre-Budget report. We will continue to support families, but we also have to support Britain's businesses and to ensure that Britain remains a competitive place in which to do business.
I need to mention a minor technical matter relating to the reduction in the rate of corporation tax. Owing to an unintended oversight, the rules for giving double taxation relief on foreign income did not get altered to reflect the reduction in the corporation tax rate. If that were uncorrected, some companies could face double taxation on a small part of a number of dividends received during this financial year. This technical matter obviously needs to be rectified. HMRC will discuss the solution with business representatives to find the best possible fix. We will then address the problem in next year's Finance Bill, with provisions backdated to
Capital gains tax is being restructured and made significantly simpler, with an internationally competitive main rate of 18 per cent.—less than half what it was 10 years ago. The entrepreneurs relief that the Bill introduces will benefit 80,000 business owners and investors this year alone. The Bill also maintains the competitiveness of the UK's tax system for non-domiciles; the system is being made more sustainable because we are ensuring that the principle of paying tax only on income remitted here is not exploited or undermined. We are responding to the challenges that our economy faces and we are supporting families and businesses.
The Bill addresses the challenges that the British economy faces. As I said, it supports British business and families, and I commend it to the House.
May I say how disappointed we Conservatives are, not only because the Chief Secretary did not have time to join us in Committee, but because she has not, apparently, had time to make the Third Reading speech tonight? However, I congratulate the Financial Secretary and her spokeswomen—I do not have to say "spokesmen and spokeswomen" on this occasion—on how they handled the Bill through some complicated Committee sittings. They have always been well briefed and they have nearly always been good humoured. I congratulate the Financial Secretary on her performance.
I am afraid that I cannot say the same about the Bill itself. It all started with the pre-Budget report last October, and what a lot of water has passed under the bridge since then. We have had the cancelled election, "discgate", the credit crunch, the nationalisation of Northern Rock, the soaring cost of living and the stalling of economic growth. The Prime Minister's stock has hit record lows and the Chancellor's pre-Budget and Budget packages have fallen apart.
Britain is a less self-confident place than it was last October. What people want in these difficult times is a strong Government who are clear of purpose, united around a long-term strategy, and competent in delivery. What they have is a disunited, indecisive, incompetent Government, whose failures in managing the British economy during the good years are now being paid for by the British people. The Government have become so distracted by their own problems that they have missed the opportunities that the Bill offered. They are so busy fighting each other that they have not had time to fight for Britain.
There has never been an occasion on which a Government have had to surrender so comprehensively on their keynote financial legislation. Never in my memory has a Finance Bill grabbed the newspaper headlines in the way this one has done. First, there was the abolition of the 10p rate. We went from receiving a prime ministerial insistence that there were no losers to the announcement of a £2.7 billion compensation package for 4.2 million of them in just a few weeks. However, there is still no answer to the plight of the remaining 1.1 million people, and no confirmation of the treatment, next year and the year after, of personal allowances and additional winter fuel payments for the lucky 4.2 million. It was never clear to me why it is apparently possible to announce a solution for those 1.1 million people only in the pre-Budget report, but eminently possible to announce a solution for the other 4.2 million people in the middle of the Crewe and Nantwich by-election campaign. When short-term political interest demanded it, the Government re-opened the Budget that they said could not be re-opened, and found money that they said they did not have.
Next there was the humiliating climbdown on capital gains tax. Faced with a united outcry from the business community, and seeing his base of business support disintegrating, the Prime Minister ordered a U-turn, picking off the largest business lobby with a watered-down retirement relief for small businesses. However, that did not work, and the retirement relief that business really wants today is the relief that the Prime Minister's retirement will bring for all of us.
There was also the non-dom climbdown—the retreat from the proposals spelled out in the pre-Budget report. That retreat was executed with all the finesse that one would expect of a great, clunking fist, and the Government achieved the worst of all worlds. They have alienated the non-dom community and have undermined its confidence in the future and they have managed to raise £100 million less from the whole exercise than they said they would.
I could go on and mention the foreign profits tax regime and the income-splitting rules, both of which were cancelled. The common theme is of short-term political calculation overriding long-term principle. The man whose decision not to hold a general election was not at all influenced by the opinion polls has managed the tax agenda for short-term political advantage, not long-term fiscal stability. That is the very opposite of the long-term decisions about which the Prime Minister used to boast.
What we needed was a Finance Bill that would begin to repair the damage done to Britain's reputation and tax competitiveness over the past few months. Instead, the Government are focused on digging themselves out of their own difficulties and trying to save their skin. They never learn; instead of taking the lifelines that they have been offered on vehicle excise duty, they have insisted on enshrining "son of 10p" in the form of the delayed road tax rises for next April, which is probably a month or so before the county and European elections, and the following April, which will probably be a month or so before a general election. They will do another U-turn on vehicle excise duty, and they just have not had the guts to own up to it today. Labour Back Benchers have tasted blood, and fiscal policy is no longer under the control of the Chancellor. The question is not if, but when, they will force that change. Will it be at the pre-Budget report, or will they bide their time until next spring?
The Bill goes on to extend the powers of the tax authorities to enter premises and seize material on an unprecedented scale. It raises the tax rate on small companies and road tax on 80 per cent. of cars by 2010. It penalises responsible drinkers with unfair excise duty rises, clobbers businesses with £500 million of extra capital gains tax and scraps agricultural and industrial buildings allowances. But still, after all those measures, it fails to deliver relief to the 1.1 million losers from the 10p fiasco—among the lowest earners in our society. This will go down in history as the 10p Finance Bill, and those 1.1 million losers will be a lasting reminder of this Prime Minister's abandonment of principle and conviction to political calculation. I urge my hon. Friends to record our rejection of that approach and of the Bill by voting against its Third Reading.
Thank you, Mr. Deputy Speaker, for calling me to make a few closing remarks at the end of what has been a legislative marathon and, on many occasions, an oratorical feast, as we have just heard from Mr. Hammond. According to him, not a single calculation that the Government have made has not been a cynical calculation, not a single principle that he holds is not a deeply held principle, not a single climb-down performed by the Government has not been a humiliating climb-down, and every single policy brought forward by Ministers has, at one stage or another, unravelled. An amazing array of oratorical treats has been laid before us. Most of all, we have heard on many occasions that the Government should have fixed the roof while the sun was shining—an entirely appropriate policy from the party of Thatcher, showing how much the Conservatives remain in hock to their heroine.
The process has been a bit like being in a "Big Brother" household. I pay tribute to the Ministers—the Financial Secretary, the Exchequer Secretary and the Economic Secretary—and, because one gets used to the character and strengths and weaknesses of all the others performing on the Committee, to the hon. Members for Runnymede and Weybridge, for Fareham (Mr. Hoban), for Putney (Justine Greening) and for South-West Hertfordshire (Mr. Gauke). Of course, I should not forget my hon. Friend Mr. Breed, who was good enough to allow me to return for a constituency engagement on the final day of the Committee, when I told him that it was due to wrap up by about 4 o'clock and found out the next day that it had finished at 9.15 in the evening. I am still indebted to him, but perhaps the fact that I have been in the Chamber for the past eight hours has gone some way towards paying back that debt.
This Budget has represented an extraordinary series of difficulties and disasters for the Government, and the Finance Bill has impinged on the national consciousness and mainstream opinions in a way that I suspect most do not. My constituents, and I am sure those of all hon. Members, have taken an active interest in the 10p tax saga, vehicle excise duty retrospection, and even items that are slightly more obscure for some people, such as the confusion over non-dom taxation. What is extraordinary is that this has been a moving feast throughout the Bill's passage. The Government have been bringing in emergency announcements and new clauses, but these matters are still not resolved. It feels as though we are bringing the whole matter to a conclusion—that is the parliamentary ritual that we are performing—but the Government have still left open the issue of the 1.1 million outstanding net losers as a result of the doubling of the 10p tax rate. We also heard this afternoon that there is more ongoing unfinished business over non-doms, further deliberation about vehicle excise duty being retrospective, and the issue of the 2p on fuel duty has been postponed until the autumn. This is moving from one Finance Bill to another, one pre-Budget report to another, and one Budget statement to another—a rolling programme of confusion.
During this period, the Prime Minister has overseen a collapse in the Government's reputation, and I am afraid that the proposals that have been put before us in this Bill are unlikely to rescue the reputation of him personally or of his Government. On that basis, Liberal Democrat Members will also be in the Lobby voting against its Third Reading.
I will not detain the House for long, but it would be wrong for me not to speak, as it was the first time that I had the honour of serving on the Committee considering the Finance Bill, where I saw democracy in action. I would like to praise my Front-Bench team, who did an extraordinary job, winning the argument time and time again, but when a Division was called, those on the Government side ran in from the corridor, asked which way they were supposed to vote and every amendment was voted down.
Indeed, except for one.
My abiding memory was the important debate about air passenger duty, and discrimination against tall people on aeroplanes. We were told in all honesty that this measure would raise £5 million a year, but it was then explained to the Government that not a single business airline was covered, so exactly zero would be raised by the change in the law. It was an enjoyable experience. Those on the Government Front Bench answered all the questions put to them, and they were very helpful. We won the arguments, but unfortunately we lost the votes.